Central Bank fines Western Union €1.75m

Firm’s payment services could have been used for money laundering and/or terrorist financing Central Bank says

The Central Bank has fined Western Union Payment Services Ireland €1.75m because of failures in anti money laundering practices which could have left the firm’s payment services open to being used for money laundering and/or terrorist financing.

The Central Bank’s director of enforcement, Derville Rowland said that the level of the fine imposed reflects a significant increase on penalties previously imposed for similar failures, and is due to the sector in which the firm operates and its reliance on third party agents and outsourced service providers.

“The firm is a global market leader in the provision of payment services. I am therefore concerned that this firm failed to have in place sufficiently robust systems and procedures to train agents, to monitor and identify suspicious activity in respect of smaller transactions, and to maintain appropriate records,” she said.

Western Union provides money transfer services through a large network of agents. The agents accept money on behalf of Western Union, which transfers it as requested for a fee.

Problems were first noticed during an inspectionby the Central Bank, and following a further investigation, the regulator found that Western Union failed to adopt sufficiently robust policies and procedures in relation to Anti Money Laundering (AML)/CFT outsourcing; customer due diligence record retention; induction and training of retail agents; and systems for monitoring and identifying suspicious activity.

The company’s IT systems did not monitor transactions that were under $500 or the equivalent amount in euro, leaving it to a group function in Denver, even though the splitting of payments into many separate smaller payments is a common method used to launder money.

“Similarly, terrorist financing is often carried out by small payment transfers,” the Central Bank said.

Training was another area where shortcomings were identified, as Wester Union did not have adequate controls to ensure that appropraite AML training was provided to all its agents’ employees.

Problems also arose in the manner that Western Union outsourced key AML/CFT compliance functions to another group entity located in Lithuania by way of a “chain” outsourcing arrangement.